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Financial Accounting Assignment Sample

Introduction

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The goal of this project is to incorporate fundamental concepts and techniques of financial accounting that allow financial accountants to record and prepare simple final accounts. This project report consists of 4 assignments; each assignment covers various financial accounting topics. In Task 1 the sole proprietor's business transactions are reported by double entry bookkeeping and are formed depending on the account balancein the end in the trial balance. In Task 2; final accounts for Italian Wines Ltd. are prepared by applying correct standards, this task will demonstrate how the financial statements are changed according to available additional details, such as accruals, prepayments, bad debts, etc. In Task 3; the principle of bank reconciliations is explained; how to reconcile cash book with bank passbook, what changes are appropriate in order to reconcile both balances also discussed in the paper. Task 4; listed two forms of control account (debtors and creditors control account), also describes how to rectify differences between sales ledger balance and debtor's control account. Suspense account management is done at report closure where error rectification is achieved by moving journal entries.

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Task 1.1

Trial balance: It is a document prepared to identify any difference between debit and credit balance, where debit side enters all assets and expenses and credit side reports all liabilities and income (Sharma, 2019).

 

 

Trial Balance as on 31st March, 2020

S. No.

Particulars

L.F.

Debit Amount

Credit Amount

1

Premises

 

340000

  

2

Van

 

51250

  

3

Fixtures

 

8100

  

4

Inventory

 

63900

  

5

P Mullen

 

1400

  

6

F Lane

 

3100

  

7

Cash at Bank

 

62400

  

8

Cash in hand

 

5600

  

9

S Hood

 

 

2150

10

J Brown

 

 

4600

11

Capital (Balancing Figure)

 

 

529000

 

 

 

 

  

 

Total

 

535750

535750

Task 1.2

I.

The double-entry system of accounting says that the amount of each transaction in business should be reflected in at least two accounts. The framework of this bookkeeping method directs that the amount of debit and credit column should tally for every transaction (Sangster and Rossi, 2018).

 

Journal Entries

Date

Particulars

L.F.

Dr. Amount

Cr. Amount

April

 

 

 

 

1

Storage Cost a/c Dr.

 

400

 

 

To Bank a/c

 

 

400

 

(Being storage cost paid)

 

 

 
   

 

  

 

2

Purchase a/c Dr.

 

5000

  

 

To S Hood a/c

 

 

1400

 

To D Main a/c

 

 

2000

 

To R Foot a/c

 

  

1600
 

(Being good brought on credit)

 

 

  

 

 

 

 

 

3

T Cole a/c Dr.

 

1650

 

 

F Syme a/c Dr.

 

2000

  

 

J Allen a/c Dr.

 

900

 

 

F Lane a/c Dr.

 

750

 

 

To Sales a/c

 

 

5300

 

(Being goods sold on credit)

 

 

 
   

 

  

 

4

Motor expenses a/c Dr.

 

400

 

 

To cash a/c

 

 

400

 

(Being motor expenses paid in cash)

 

 

  

 

 

 

 

 

7

Capital a/c Dr.

 

1500

 

 

To cash a/c

 

 

1500

 

(Being cash withdrawn by owner)

 

 

 
   

 

  

 

9

T Cole a/c Dr.

 

650

  

 

J Allen a/c Dr.

 

1300

 
 

To Sales a/c

 

  

1950

 

(Being goods sold on credit)

 

 

  

 

 

 

 

 

14

Van a/c Dr.

 

28500

 

 

To Abel Motors a/c

 

 

28500

 

(Being Van purchased on credit)

 

 

 
   

 

  

 

16

Bank a/c Dr.

 

6500

  

 

To P Mullen a/c

 

 

1400

 

To F Lane a/c

 

  

3100

 

To F Syme a/c

 

 

2000

 

(Being cheques received from debtors)

 

 

 
   

 

  

 

22

Purchase a/c Dr.

 

1800

  

 

To D Main a/c

 

 

1800
 

(Being goods purchased on credit)

 

  

 

 

  

 

 

  

24

S Hood a/c Dr.

 

2150

 
 

J Brown a/c Dr.

 

4600

 

 

R Foot a/c Dr.

 

1400

  

 

To Cash a/c

 

 

8150

 

(Being payment made to creditors)

 

 

 
   

 

  

 

27

Salaries a/c Dr.

 

4800

  

 

To Bank a/c

 

 

4800

 

(Being Salaries paid)

 

  

 

 

  

 

 

  

30

Business expenses a/c Dr.

 

1320

 

 

To Bank a/c

 

  

1320

 

(Being business rates paid)

 

  

 

 

  

 

 

  

31

Abel Motors a/c Dr.

 

28500

 
 

To Bank a/c

 

 

28500

 

(Being payment made to Abel Motors)

 

  

 

 

  

 

 

  

 

TOTAL

 

94120

94120

 

Ledger: A ledger is a secondary entry book that records transactions directly from journal entries after passing journal entries (Minnis and Sutherland, 2017). Each ledger account consists of opening and closing account, where the closing account number for further calculations is forwarded to the corresponding financial statement. Cash, receivable accounts, savings, inventory, accounts payable, unpaid expenses, and consumer deposits are examples of the ledger.

 

Cash a/c

Date

Particulars

Amount

Date

Particulars

Amount

April

 

  

April

 

 

1

To balance b/d

5600

4

To motor expenses a/c

400

 

 

  

7

To Capital a/c

1500

 

 

        

 

 

        

 

 

        

 

 

        

 

 

        

 

 

  

 

    

 

 

  

 

    

 

 

  

 

  

 

 

 

  

30

By balance c//d

3700

 

 

  

 

  

 

 

 

5600

 

 

5600
               

Purchase a/c

Date

Particulars

Amount

Date

Particulars

Amount

April

 

  

April

 

 

2

To S Hood a/c

1400

      
 

To D Main a/c

2000

    

 

 

To R Foot a/c

1600

 

  

 

22

To D Main a/c

1800

 

  

 

 

 

  

 

  

 

 

 

  

 

  

 

 

 

  

 

  

 

 

 

  

30

By balance c/d

6800

 

 

  

 

  

 

 

 

  

 

  

 

 

 

  

 

  

 

 

 

  

 

  

 

 

 

6800

 

 

6800
               

S Hood a/c

Date

Particulars

Amount

Date

Particulars

Amount

April

 

  

April

 

 

24

To bank a/c

2150

1

By balance b/d

2150

 

 

  

2

By Purchase a/c

1400

 

    

 

  

 

 

 

  

 

  

 

30

To balance c/d

1400

 

  

 

 

 

  

 

  

 

 

 

3550

 

 

3550
               

D Main a/c

Date

Particulars

Amount

Date

Particulars

Amount

April

 

  

April

 

 
     

2

By Purchase a/c

2000

 

 

  

22

By Purchase a/c

1800

 

    

 

  

 

 

 

  

 

  

 

30

To balance c/d

3800

 

  

 

 

 

  

 

  

 

 

 

3800

 

 

3800
               

T Cole a/c

Date

Particulars

Amount

Date

Particulars

Amount

April

 

  

April

 

 

3

To Sales a/c

1650

      

9

To Sales a/c

650

      
           
     

 

  

 

 

 

  

30

By balance c/d

2300

 

 

  

 

  

 

 

 

2300

 

 

2300
               

J Allen a/c

Date

Particulars

Amount

Date

Particulars

Amount

April

 

  

April

 

 

3

To Sales a/c

900

      

9

To Sales a/c

1300

      
           
     

 

  

 

 

 

  

 

By balance c/d

2200

 

 

  

 

  

 

 

 

2200

 

 

2200
               

P Mullen

Date

Particulars

Amount

Date

Particulars

Amount

April

 

  

April

 

 

1

To balance b/d

1400

16

By bank a/c

1400
           
           
     

 

  

 

 

 

  

 

    

 

 

  

 

  

 

 

 

1400

 

 

1400
               

Abel Motors a/c

Date

Particulars

Amount

Date

Particulars

Amount

April

 

  

April

 

 

31

To bank a/c

28500

14

By Van a/c

28500
           
           
     

 

  

 

 

 

  

 

    

 

 

  

 

  

 

 

 

28500

 

 

28500

 

Bank a/c

Date

Particulars

Amount

Date

Particulars

Amount

April

 

  

April

 

 

1

To balance b/d

62400

1

By storage cost a/c

400

16

To P Mullen a/c

1400

24

By S Hood a/c

2150

 

To F Lane a/c

3100

  

By J Brown a/c

4600

 

To F Syme a/c

2000

  

By R Foot a/c

1400

 

 

  

27

By Salaries a/c

4800

 

 

  

30

By Business expenses a/c

1320

 

 

  

30

By Abel Motors a/c

28500

 

 

  

 

    

 

 

  

 

    

 

 

  

 

  

 

 

 

  

 

By balance c//d

25730

 

 

  

 

  

 

 

 

68900

 

 

68900
               

Sales a/c

Date

Particulars

Amount

Date

Particulars

Amount

April

 

  

April

 

 
     

3

By T Cole a/c

1650
       

By F Syme a/c

2000

 

 

  

 

By J Allen a/c

900

 

    

 

By F Lane a/c

750

 

 

  

9

By T Cole a/c

650

 

 

  

 

By J Allen a/c

1300

 

 

  

 

  

 

30

To balance c/d

7250

 

  

 

 

 

  

 

  

 

 

 

  

 

  

 

 

 

  

 

  

 

 

 

  

 

  

 

 

 

7250

 

 

7250
               

R Foot a/c

Date

Particulars

Amount

Date

Particulars

Amount

April

 

  

April

 

 

24

To bank a/c

1400

2

By Purchase a/c

1600

 

 

        

 

    

 

  

 

 

 

  

 

  

 

30

To balance c/d

200

 

  

 

 

 

  

 

  

 

 

 

1600

 

 

1600
               

 J Brown a/c

Date

Particulars

Amount

Date

Particulars

Amount

April

 

  

April

 

 

24

To bank a/c

4600

1

By balance b/d

4600

 

 

        

 

    

 

  

 

 

 

  

 

  

 

 

    

 

  

 

 

 

  

 

  

 

 

 

4600

 

 

4600
               

F Syme a/c

Date

Particulars

Amount

Date

Particulars

Amount

April

 

  

April

 

 

3

To Sales a/c

2000

16

By bank a/c

2000
           
           
     

 

  

 

 

 

        

 

 

  

 

  

 

 

 

2000

 

 

2000
               

F Lane a/c

Date

Particulars

Amount

Date

Particulars

Amount

April

 

  

April

 

 

1

To balance b/d

3100

16

By bank a/c

3100

3

To Sales a/c

750

      
           
     

 

  

 

 

 

  

 

By balance c/d

750

 

 

  

 

  

 

 

 

3850

 

 

3850
               

Van a/c

Date

Particulars

Amount

Date

Particulars

Amount

April

 

  

April

 

 

1

To balance b/d

51250

      

14

To Abel Motors a/c

28500

      
           
     

 

  

 

 

 

  

 

By balance c/d

79750

 

 

  

 

  

 

 

 

79750

 

 

79750
               

Capital a/c

Date

Particulars

Amount

Date

Particulars

Amount

April

 

  

April

 

 

7

To cash a/c

1500

1

By balance b/d

529000

 

 

        

 

    

 

  

 

 

 

  

 

  

 

 

To balance c/d

527500

 

  

 

 

 

  

 

  

 

 

 

529000

 

 

529000

 II.

Trial Balance as on 30th April, 2020

Particulars

L.F.

Debit Amount

Credit Amount

Premises

 

340000

  

Van

 

79750

  

Fixtures

 

8100

  

Inventory

 

63900

  

Purchases

 

6800

  

Sales

 

  

7250

Cash at Bank

 

25730

  

Cash in hand

 

3700

  

Storage cost

 

400

  

Motor expenses

 

400

  

Salaries

 

4800

  

Business expenses

 

1320

  

S Hood

 

 

1400

R Foot

 

 

200

D Main

 

 

3800

T Cole

 

2300

  

J Allen

 

2200

  

F Lane

 

750

  

Capital

 

 

527500

 

 

 

  

Total

 

540150

540150

 III.

Analysis from the trial balances of 31st March 2020 to 30th April 2020:

  • The Van account has an increase of 28500 because of new purchases made (Berger, et al., 2017).
  • Sundry creditors have shown a decrease of 1350 due to payments made to creditors.
  • Sundry debtors have shown an increase of 750 due to credit sales made during the period.
  • Capital has decreased with 1500 because of cash withdrawal.
  • Cash balance decreased with 1900 and bank balance with 36670 due to purchase and expenses done in the month.
  • The total of trial balance is 4400 pounds more, which shows the new expenses, incurred, purchases and sales done in the period.

Task 1.3

The balances of trial balance end up in financial statements that is, the profit & loss account for expenses and income and balance sheet for the assets and liabilities (Murtala, et al., 2018).

 

Statement of Profit and Loss for the period ending 30th April, 2020

Particulars

 

Amount

Sales

 

7250

Less: Purchases

 

6800

Gross Profit

 

450

Less: Other expenses

 

 

Storage cost

400

 

Motor expenses

400

 

Salaries

4800

 

Business expenses

1320

6920

 

 

 

 

 

 

 

 

 

Net Profit or Loss

-6470

 

Balance Sheet as on 30 April, 2020

Equities and Liabilities

 

Amount

Capital

527500

 

Less: Net P&L

-6470

521030

 

  

 

Creditors:

  

 

S Hood

1400

 

R Foot

200

 

D Main

3800

5400

 

  

 

 

  

 

 

  

 

 

  

 

Total Liabilities

526430

 

Assets

 

Amount

Premises

  

340000

Van

  

79750

Fixtures

  

8100

Inventory

  

63900

Debtors:

  

 

T Cole

2300

 

J Allen

2200

 

F Lane

750

5250

Cash at Bank

  

25730

Cash in Hand

  

3700

 

 

 

Total Assets

526430

 Task 2.1

Financial Statement of Accounting: Financial statements indicate point in time reporting and are compiled by executive accounting heads. A financial report statement is made up of different reports including; the balance sheet, profit accounts, owner's equity statement and cash flow statement (Murtala, et al., 2018). These claims are often considered for their ultimate value by outside stakeholders such as borrowers, lending companies, tax department and investors.

 

Comparison of different financial statements:

Basis

Balance sheet

Income statement

Cash flow statements

Purpose

This statement depicts the position of finances of the business on a specified date.

It shows the profit earned during the period from the operations of the business.

It identifies the inflow and outflow of cash in the company for its accounting period.

Structure

It consists of two parts namely the Equity and Liabilities and the Assets.

It also has two types of transactions namely, the income and the expenses of the business (Berger, et al., 2017).

It shows cash flows from three categories namely, operating, financing and investing activities.

Content

Assets consist of long-term assets and short-term assets whereas the Equities and Liabilities part contains information about capital balance, long-term and short-term liabilities (Liang, etal., 2016)

The income side contains the income from operating and other activities and the expense side shows the operating and other expenses incurred in the company for its financial year.

It shows only the activities that have taken place in cash and ignores all non-cash items. The operating cash flow shows inflow or outflow from operating activities. The investing and financing cash flows shows the increase or decrease in cash flows from investments and financing activities respectively.

 Task 2.2

Profit and loss a/c for the year ended 31st March, 2020

 

 

 

 

Particulars

L/f

Debit (£)

Credit (£)

Sales revenue

 

 

198000

Opening Inventory

 

12000

 

Purchases

 

102000

 

Closing Inventory

 

 

14000

Gross profit

 

 

98000

Salaries and wages

 

5500

 

Add: Accrued salary

 

2000

 

Administrative expenses

 

24500

 

Distribution expenses

 

14000

 

Dividends paid

 

1000

 

Depreciation:

 

 

 

Property 2%

 

6000

 

Motor Vehicles 10%

 

1000

 

Net profit before interest and taxes

 

 

44000

Less: Tax

 

9000

 

Net profit before interest and after tax

 

 

35000

Less: Interest@10%

 

1500

 

Net profit after interest and tax

 

 

33500

 Task 2.3

Financial position of Italian Wines as on 31st March 2020:

Financial position as on 31st March 2020

 

 

 

EQUITY AND LIABILITIES

£

£

Equity:

 

 

Issued Share capital

100000

 

Revaluation Reserves

50000

 

Share Premium

50000

 

Retained earnings

112000

312000

Non-current Liabilities:

 

 

10% Redeemable loan

  

15000

Current Liabilities:

 

 

Accrued salary

2000

 

Trade payables

21000

 

Tax liability

9000

 

Accrued Interest@10%

1500

33500

Total Equity and liabilities

 

360500

 

 

 

ASSETS

£

£

Non-Current Assets:

 

 

Property

300000

 

Less: Depreciation

9000

291000

Motor Vehicles

10800

 

Less: Depreciation

1800

9000

 

 

300000

Current Assets:

 

 

Trade receivables

24000

 

Bank and Cash

22500

 

Inventory

14000

60500

Total Assets

 

360500

 Task 2.4

a)

 

    

 

Return on capital employed

£

£

A

Earning before Interest and Tax (EBIT)

 

44000

 

Total Assets

360500

 

 

Less: Current Liabilities

33500

 

B

Capital Employed

 

327000

 

ROCE (A/B) × 100

 

13%
       

b)

 

 

  

 

Gross Profit Margin

£

  

A

Gross Profit

98000

  

B

Net Sales

198000

  

 

Gross Profit Margin (A/B) × 100

49%

  
       

c)

 

 

  

 

Net Profit Margin

£

  

A

Net profit after interest and tax

33500

  

B

Net sales

198000

  

 

Net Profit margin(A/B) × 100

17%

  
       

d)

 

 

  

 

Debtors Turnover Ratio

£

  

A

Net Credit Sales

198000

  

B

Average accounts receivable:

24000

  

 

Debtors Turnover Ratio (A/B)

8.25

  
       

e)

 

 

 
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